Six mid-cap and small-cap bets from Rohan Shah of Asit C Mehta

indices have gained over 45% in 2023 and 25% in 2024 till date.

Mid-cap and small-cap stocks have been in the limelight ever since global turmoil hit equities the world over, with India being no exception.

On Monday, the BSE MidCap and BSE SmallCap indices fell 3.60 percent and 4.21 percent, respectively – much more than the benchmark Sensex which lost 2.74 percent. For the two broader indices, it was the biggest single-day decline since June 4.

More importantly, both the indices are trading at expensive valuations: BSE MidCap's one-year forward P/E is 30.11x (10-year average: 25.83x), and the BSE SmallCap is at 25.92x (10-year average: 19.65x). Both indices have gained over 45 percent in 2023 and 25 percent in 2024 to date.

Moneycontrol spoke to Rohan Shah, Technical Analyst, Asit C Mehta Financial Services to know their top three midcap and smallcap stock recommendations after the decline. Here's what he said:

Mid-cap stocks

1) Jyothy Lab (Target : 605, Stoploss : 500): After hitting the high around 550 in late January 2024, the stock has been trading in a corrective phase with supportive volumes. The corrective price action has formed a potential bullish Cup and the Handle price pattern indicates bullish bias. This week price has recorded a breakout from the mentioned pattern highlighting resumption in the trend. The breakout has been accomplished with noticeable volumes adding further confirmation to the breakout. The price is trading above all its key moving averages (20, 50,100,200) which highlights inherent strength in price. Thus following price action and uptick in volumes indicate price is set to hit record-high levels.

2) Patanjali (Target : 1950, Stoploss : 1680): The stock has been forming a Volatility contraction pattern for the last many months with supportive volumes which indicates potential accumulation by the stronger hands at the elevated levels. In the last session, the stock witnessed a breakout to record high levels surpassing its previous swing high indicating upward momentum to continue. The breakout has seen a decent surge in volumes and supportive momentum adding further confirmation to the breakout.

3) Jubilant Foodworks (Target : 700, Stoploss : 550): The stock has recorded a breakout from the bullish trend price pattern i.e. Double Bottom which highlights a potential shift in trend from downwards to upwards. The breakout from the mentioned pattern has seen a noticeable surge in volumes. On the higher degree chart, the stock has also registered a breakout from the falling resistance trendline which complements the bullish bias on price. Thus considering the price pattern and momentum indicator we believe the price to inch higher and surpass its previous swing high.

Small-Cap stocks

1) Network 18 (Target: 105, Stoploss : 87): After making a high of 135.7 on Jan 24’, stock retraced and formed a base near 61.8% Fibonacci retracement area of its previous upmove. The stock witnessed a breakout and retested from a prolonged three months of consolidation range, holding strong above 200DMA with an uptick in volumes in the stock which suggests momentum to continue in the stock. Additionally, the stock has witnessed a breakout from the squeeze Bollinger band denotes volatility likely to expand on the higher side and thus compliments bullish bias on price.

2) IEX (Target: 210, Stoploss: 184): IEX has ended its prolonged consolidation range, which continued for over two years, denoting a potential shift in trend from sideways to upwards. Recently, the price rallied higher, testing the support zone. This suggests upward momentum in the stock to continue. Additionally, the momentum indicators, such as RSI 14 have shown a positive bounce. On the volume front, it was thin during consolidation and a spike was seen on breakout. The price breakout along with the volume spike indicates an upward trend is likely to persist.

3) Welspun Living (Target: 200, Stoploss: 176): Welspun Living has been trading in a strong uptrend. It has observed a breakout from a bullish continuation pattern that is the cup & handle pattern on the weekly chart which continued for over three years. The breakout has seen a spike in volumes which adds further confirmation to the breakout. Hence following price pattern and volume activity we believe the price to resume its prior trend and inch higher.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.